A hearing to explore how the Nebraska Legislature might help locally managed pension funds made one thing clear: There is no easy solution.
"Maybe you can't wave the magic legislative wand and get a solution that fixes everything, but we can drive toward those solutions," said State Sen. Jim Smith of Papillion.
The hearing at Metropolitan Community College's South Omaha campus Monday included testimony from a variety of experts on retirement plans.
Representatives from Lincoln and Omaha talked about their pension programs, while academics and other experts shed light on the complicating factors of pension reform.
Local governments are contractually obligated to pay the benefits they have promised to existing employees. And even switching newly hired public employees to a defined contribution plan, such as a 401(k), would increase costs for about 15 to 20 years as pensioned employees finished out their careers, said Donn Jones, an actuary with the SilverStone Group.
Jones, who has consulted on public retirement issues since the 1980s, offered advice to legislators looking to step into the public pension arena. He suggested they gain some perspective on the issue by looking at pension fund performance in the decades before the recent economic downturn.
Then, he said, "Figure out what you want to accomplish."
Much of Monday's discussion covered locally run pensions in a general way, though the undercurrent was clearly Omaha's two massively underfunded pension programs, one for police and fire employees and the other for civilians.
Omaha's obligations are a main reason the Legislature likely won't consider mandating a switch away from pension plans.
"What's the City of Omaha to do the day after we pass that bill?" asked Sen. Steve Lathrop, chairman of the Legislature's Business and Labor Committee. "They would have to pass bonds and immediately raise $500 million. They can't do that."
Several speakers said pensions, in and of themselves, are not the problem. Roger Rea, speaking on behalf of the Nebraska State Education Association, pointed out that pension systems run by the state are among the most well-funded in the country.
Looking at the differences between sound public pension systems and those at risk might provide some guidance to the Legislature as it tries to tackle the issue, said David Nabity, chairman of the Omaha Alliance for the Private Sector. He pointed out that Omaha's pension plan was more than 80 percent funded as recently as 2000. Now it stands at some 43 percent.
While market conditions undoubtedly played a role, Nabity suggested that a 2003 contract negotiated by then-Mayor Mike Fahey is also to blame. That contract lowered the retirement age and increased the maximum payout percentage from 55 percent of pay to 75 percent of pay, he said.
"When do the citizens of Omaha step up and say, 'Wait a minute, this thing has gone off the rails?' " he asked.
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